Five years later, could pessimism be deeper?

When ferrous scrap market players gathered at the Institute of Scrap Recycling Industries annual convention five years ago, many did so with a sense of optimism despite still being in the well of the economic downturn. Yes, prices had fallen yet again in April 2009, but the situation was already somewhat improved from its nadir the previous fall.

Furthermore, much of the talk centered around the idea that there was a good chance the bottom already had been reached. Mill output was down, but scrap exports were regaining steam. And symbolically, the appearance of former President Bill Clinton at the event was a reminder that a Democratic leader could be good for the industry, even as many grumbled privately about President Obama, then still in his first few weeks in office.

Five years on, the economy has slowly if stubbornly picked up at a steady pace, and the price of scrap has tripled or better on most grades. Yet as attendees prepare to gather at this years ISRI conference, there may be less confidence in the air than in 2009. Why?

There remains a feeling among many in the ferrous scrap sector that something isnt right. Although prices have risen dramatically from five years ago, in general they were lower in 2012 and 2013 than during 2010 and 2011. Besides, even with higher prices, margins are tight, presenting tremendous operational challenges.

Beyond that, mill output--which also is up dramatically from historical lows at the beginning of the downturn--appears stuck for now at about three-quarters of capacity, while at the same time scrap export demand took a big hit in 2013 and does not look likely to recover any time soon.

The years-long gridlock in Washington and Obamas sometimes reluctance to more decisively tackle the issues at hand also clearly have undermined what could have been a stronger economic recovery, leaving a still-tenuous state of affairs that worries many in the business community.

And that last point is really what will set the mood at this years ISRI convention in Las Vegas. For every strong indicator or optimistic viewpoint among those in the scrap business, there is a corresponding weak or pessimistic one. That creates doubt--or uncertainty, to use the buzzword of the decade--and doubt is almost never good for business recovery.

An interesting side note: this years keynote speaker at the ISRI conference is scheduled to be former Secretary of State Hillary Clinton, who is widely regarded as a frontrunner for the Democratic presidential nomination in 2016. Its funny how things sometimes seem to come full circle, or at least close to it.

John AmbrosiaMagazine editor

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